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ELRCDismissedNot stated in judgment· [2021] KEELRC 1589 (KLR)

Daniel Njuguna Chege & 4 others v Tusker Mattresses [2021] KEELRC 1589 (KLR)

Employment and Labour Relations Court
11 June 2021
1,401 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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What this practically means

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Executive summary

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This is a ruling of the Employment and Labour Relations Court at Nairobi (James Rika, Judge) on the Respondent's application dated 23rd November 2020, made after judgment had been entered for the Claimants in the sum of Kshs. 3,957,348 on 29th April 2020. Execution commenced and the Respondent's motor vehicles were attached. The Respondent sought leave for the law firm O & M Law LLP to come on record, a temporary injunction against further proclamation, attachment and sale of its assets, release of the attached motor vehicles, and a stay of proceedings, relying on insolvency orders made in a High Court liquidation suit by one of its creditors, and on Sections 430 of the Insolvency Act and 225 of the Companies Act, supported by Ndane Construction Company Limited v. Spencon Kenya Limited and Kagwimi Kang'ethe & Company Advocates v. Olerai Nurseries Limited. The Claimants opposed, noting a payment agreement whose cheques were dishonoured, want of full disclosure, and that O & M was not properly on record, Kanchory & Company having acted at judgment. The Court held O & M was not properly on record, its submissions falling with the application. On the merits, the Court held the Insolvency Act and Companies Act were not intended to halt proceedings at the tail end of execution; attached assets remain under the E&LRC's jurisdiction and are not available for redistribution to other creditors. The primary insolvency law for employers before this Court is Part III of the Employment Act, and the Respondent did not demonstrate insolvency under Section 67. The application was declined with costs to the Claimants.

Key legal issues

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01

Whether O & M Law LLP was properly on record for the Respondent

Holding

Not properly on record; no leave obtained with participation of previous advocates Kanchory & Company

Reasoning

The Respondent merely stated it had sought leave and that the prayer was unopposed. The Court held this did not meet the legal requirement for post-judgment representation. O & M had not engaged Kanchory & Company, there was no signed consent, and it was unclear whether Kanchory & Company had been served. Submissions by counsel not properly on record fall with the application.

p. 2
02

Whether High Court insolvency orders stay execution in this Court

Holding

No - the Insolvency Act and Companies Act do not halt proceedings at the tail end of execution; attached assets remain under the E&LRC's jurisdiction

Reasoning

The attached assets had already been designated for sale under orders of this Court following a separate judicial process. They are not available for redistribution in the insolvency pool. Insolvency of an employer relevant to this Court is governed by Part III of the Employment Act, particularly Section 67, which the Respondent did not invoke or satisfy. The Claimants' right to fair and expeditious administration of justice also weighed against the stay.

p. 2
03

Whether the Respondent demonstrated insolvency under the Employment Act

Holding

No - the Respondent did not demonstrate insolvency within Section 67 of the Employment Act

Reasoning

Section 67 defines insolvency of an employer company as existing only where a winding up or administration order has been made, a voluntary winding up resolution passed, or a Receiver or Manager appointed. The Respondent relied instead on the Insolvency Act and Companies Act and did not address the Employment Act regime at all, so the threshold was not met.

p. 2
04

Effect of the Parties' settlement agreement and dishonoured cheques

Holding

The Respondent had agreed a mode of payment and issued cheques that bounced, and this context weighed against releasing attached assets

Reasoning

Judgment had been delivered for the Claimants; execution commenced and assets attached; the Parties agreed on payment of the decretal sum; cheques dated 10th and 12th November 2020 were dishonoured. The Court considered the attachment against the Parties' settlement agreement, holding that attached properties were not available for satisfaction of other orders or decrees in other Courts.

p. 2

Legal principles established

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  • A law firm seeking to come on record post-judgment must obtain leave with the participation of the outgoing advocates; submissions by counsel not properly on record cannot be considered
  • Winding-up/insolvency orders do not divest an executing court of attached assets already earmarked for sale under its own orders; attached assets are not available for redistribution among other creditors
  • Insolvency of an employer for purposes of employment disputes is governed by Section 67 of the Employment Act, and an employer must demonstrate insolvency under that provision

Court orders

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  1. 1.The Application by the Respondent dated 23rd November 2020, is declined
  2. 2.Costs to the Claimants

Authorities

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Legislation

  • Insolvency ActSection 430
  • Companies ActSection 225
  • Employment ActPart III; Part VIII; Section 67
  • Law of Succession Actnot specified

Cases cited (2)

  • Ndane Construction Company Limited v. Spencon Kenya Limited
    [2016] e-KLR
  • Kagwimi Kang'ethe & Company Advocates v. Olerai Nurseries Limited
    [2020] e-KLR
Jurisdiction invoked
Original jurisdiction of the Employment and Labour Relations Court over the employment dispute and resulting execution; insolvency of employers governed by Part III of the Employment Act

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "Daniel Njuguna Chege & 4 others v Tusker Mattresses [2021] KEELRC 1589 (KLR)", Case Analysis (2021). Not stated in judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2021/1589/eng@2021-06-11

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.